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Why Did My Stock Drop After a Good Earnings Report?

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Here's how to think about your stocks during earnings season.

It's earnings season. It's the time when most companies release earnings reports on the results of the most recent quarter. But all too often it seems that your favorite company reports a solid quarter, but the stock takes a dip in response. What's going on? On a Fool Live episode recorded on April 28, Fool contributors Brian Feroldi, Brian Stoffel, and Brian Withers discuss how to think about this 90-day business checkpoint and the resulting market moves. 

Brian Withers: Yeah, I wanted to take Will's question, and you said that, of course, "What's Brian's opinion [laughs] on Teladoc (TDOC -8.87%) earnings? Bullish?" I want to open it up a little bit more because generally, going into earnings, it's a little bit of a crapshoot how the company's going to respond. Teladoc is still lapping early phases of the coronavirus. So I imagine they will be hitting high rates of growth. The question will be is, what does, sort of, the market expect on those rates of growth? And Pinterest had a fantastic quarter, and then one little item about flat growth with U.S. projected for U.S. Pinners dampened the whole party.

You never know whether Teladoc or a company coming out with earnings is going to have one little thing that people sort of latch onto and call it a kind of a rough quarter. I've never called a quarter right, I don't think. I made a point on The Wrap yesterday to talk about: I think of earnings reports as sort of report cards that your kids bring home. If Johnny brings home a D in math in the sixth grade in the last semester, well, woo-hoo, he passed. But what's the context to that? Was there something in the semester that didn't go well? Now, if Johnny continues to get Ds and Cs maybe through junior high and high school, maybe the engineering career isn't in his future. It's really the long trend of earnings reports, and just one report doesn't necessarily make or break a company by any stretch.

Brian Stoffel: I heard you say Teladoc. I think you meant DocuSign more, yes?

Withers: They said, "What's Brian's opinion on Teladoc?"

Stoffel: On Teladoc. OK. Got it.

Withers: Or DocuSign, either. It's always what people sort of expect, and then if --

Stoffel: It affects the stock --

Withers: -- international growth, it looks like it's slowing down or whatever, the stock may take a step back for some, what may seem to us for long-term holders, is a silly reason.

Brian Feroldi: If I just gave you Pinterest numbers -- beat on the top line, beat on the bottom line, projecting 105% growth next quarter -- what would you think is going to happen to the stock today?

Withers: Yeah.

Feroldi: What is happening to the stock today? Down?

Withers: Yeah.

Feroldi: That's why I don't even try to predict what's going to happen with the market.

Brian Feroldi owns shares of DocuSign and Pinterest. Brian Stoffel owns shares of DocuSign. Brian Withers owns shares of DocuSign and Teladoc Health. The Motley Fool owns shares of and recommends DocuSign, Pinterest, and Teladoc Health. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
TDOC
$35.95 (-8.87%) $-3.50
DocuSign Stock Quote
DocuSign
DOCU
$69.59 (-5.67%) $-4.18
Pinterest Stock Quote
Pinterest
PINS
$22.49 (-2.17%) $0.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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